US grows concerned about Petrobras's Iranian presence
Peter Howard Wertheim
OGJ Correspondent
RIO DE JANEIRO, May 24 -- Petroleo Brasileiro SA's (Petrobras) presence in Iran has elicited concern from US Ambassador to Brazil Clifford Sobel, who recently met with Petrobras Pres. Sergio Gabrielli to discuss the issue, reported Brazilian business paper Valor.
According to the report, Sobel warned Petrobras that its forays into Iran might "create complications" for Petrobras's operations in the US sector of the Gulf of Mexico.
Petrobras told OGJ it plans to invest $4.5 billion in the gulf during 2007-11—a 60% increase over previous investments. Petrobras America plans to hike its oil output in the gulf to 130,000 b/d of oil by 2013 from the current 20,000 b/d. In February Petrobras started oil and gas production from its Cottonwood field in the gulf.
National Iranian Oil Co. (NIOC) director of exploration Seyed Mahmoud Mohades said Petrobras plans to sign a $470 million contract to develop Iran's Caspian Sea oil reserves, according to the report, and that Petrobras will drill three wells in Blocks 6 and 29 in the Iranian section of the sea.
Petrobras, however, has confirmed only that it is conducting talks with Iran on Caspian Sea projects.
Petrobras and Spain's Repsol-YPF SA also won a tender for exploration on Tosan Block in the Persian Gulf. The two companies plan to invest $35 million for exploration drilling at Tosa.
Petrobras's move into Iranian territory was hailed as "its return to the Middle East." According to Petrobras, "[The] initial contractual investment will be around $32 million over 3½ years. If the contract is extended for a further 18 months, the company will invest another $30 million. The plan is to drill two independent exploratory wells in the Tusan Block of the Persian Gulf."
Petrobras will continue to invest in Iran despite US concerns, said Brazil President Luiz Inacio Lula da Silva.
Lula said Iran is an "important trading partner" for Brazil that purchased more than $1 billion/year in goods from the Latin American country, while selling Brazil almost nothing.
"I know that there are political disagreements between Iran and other countries," said Lula. "With Brazil, there is no political disagreement, and we will continue to work together in (areas) of interest for Brazil."
Brazil's government owns 60% of Petrobras's voting shares and has a final say in its investment decisions.
US government sources said, "We think foreign investment in the petroleum and gas sectors in Iran is contrary to the international interest of pressuring the Iranian regime to suspend its enrichment-related and reprocessing activities." The sources said that while United Nations sanctions against Iran don't forbid Petrobras investments, Brazil should be careful in dealing with Iran, which is transforming itself into a "great threat to world peace," reported Valor.
Petrobras declined to comment on the issue.
Iran currently has the world's second-largest oil reserves and second-largest natural gas reserves. But the country's standoff with the US and its UN allies over the Islamic republic's nuclear program, combined with antiwestern rhetoric from Iran President Mahmoud Ahmadinejad, have intensified unease among foreign firms considering investments there.